The Legal & Legislative Landscape Affecting Royalties in 2017

Jan 11, 2017

This year is gearing up to be one of significant change, on many levels, and the music royalty business is not immune to the coming landscape shift.

The outcome of several legal and legislative battles currently underway will do much to define what this future landscape looks like. Here is an overview of the more potentially impactful issues to watch and what it means for music royalties.

Legal

Global Music Rights vs the Radio Music Licensing CommissionThe two groups are each accusing the other as operating as a monopoly. RMLC struck first, but GMR (owned by tough-as-nails Irving Azoff) immediately hit back. Drama aside, the outcome will affect how much radio has to pay to songwriters and publishers for airing their work.

DoJ vs. ASCAP/BMIThe performance rights organizations are fighting back against the DoJ’s interpretation of the consent decree, in particular the implementation of a 100% licensing rule that states a songwriter with partial ownership of a song has the right to license it so long as the other songwriters are paid (as opposed to the need to strike licensing deals with each songwriter separately). The two organizations have joined forces to fight the DoJ, BMI in court and ASCAP in Congress. Already, a rate court judge has ruled against the DoJ’s position, but the issue is far from resolved.

The Turtles vs. SiriusXM Lots of moving parts with this one, but ultimately it’s concerned with whether digital music services must pay a performance royalty for sound recordings created before 1972. If digital performance royalties are owed for pre-1972 recordings, legacy acts should see a meaningful spike in revenues, and the affected digital music services may face new financial hardship. After a separate related settlement with two bandmembers in California, SiriusXM won an appeal on the broader suit, but the issue is hardly considered resolved and may find its way to the Supreme Court.

Rights ReversionSo far this has been largely muted, but the deadline to file the first round of rights reversion claims is fast approaching. Whether publishers and labels decide to fight these claims in court will likely be answered sometime this year. Already, we’ve seen the first major battle play out in the UK, with Duran Duran losing their claim on taking back their rights from their publisher, a division of Sony/ATV. It’s likely not going to be the last such fight.

Legislative

U.S. Safe HarborThe safe harbor provision protects service providers when their users distribute unlicensed content, so long as they take down the infringing work. The result is a game of whack-a-mole that the music industry has grown tired of, and would like to see services be held more responsible for what is made available on their platforms. The U.S. Copyright Office is now in the second stage of reviewing the safe harbor policy, now it its second stage, and the music industry is likely to make a vocal contribution. Meanwhile there’s a case potentially headed to the Supreme Court on the same topic.

DoJ vs. ASCAP/BMIWhile BMI is taking the fight to the courts, ASCAP is fighting back in Congress. So far there’s been no formal submission of new legislation or other activity, but it’s expected as the two PROs present a united front against the consent decree ruling.

“Fair Play, Fair Pay” The bill requiring radio to start paying song performers (not just songwriters) remains stalled in committee, but we might see renewed movement this year. In December, the Judiciary Committee released an initial proposal for a copyright reform process, and this issue could resurface as part of that process.

CRB Rate ProceedingsThe Congressional Royalty Board is due to set new rates for Internet/Satellite radio streaming activity for 2018 – 2022, and already the requests are coming in from both sides. SoundExchange filed its request in October, with a group of publishers and labels doing the same earlier last year. Both ask for dramatic increases in payouts, which will almost certatinly be negotiation downward. Meanwhile Apple has proposed a flat rate for on-demand streams that would ultimately raise the amount on-demand services pay (seen as a tactic against rival Spotify).

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